Rule of Three: The Quick Way to Make Smarter Real Estate Decisions

Ever feel stuck choosing between a cheap condo, a pricey villa, or something in the middle? The rule of three lets you break the choice down into three easy‑to‑compare numbers. No jargon, no endless spreadsheets—just three facts that tell you if a property is worth your time.

Pick the Three Numbers That Matter Most

First, decide which three metrics will decide the deal. Most investors pick:

• Purchase Price – how much you pay up front.
• Rental Yield – the annual rent you could earn divided by the price.
• Potential Appreciation – the expected rise in property value over the next five years.

If you’re buying to live, you might swap appreciation for Commute Time or Neighborhood Score. The idea stays the same: three numbers, three quick checks.

How to Use the Rule of Three With Real‑World Examples

Take a 2‑bedroom flat in New York listed at $600,000. The average rent for a similar unit is $2,800 a month, giving a yearly rent of $33,600. Divide that by the price and you get a 5.6% rental yield. Next, look at market data – New York has shown about 3% annual appreciation historically. So your three numbers are 600k price, 5.6% yield, and 3% appreciation.

Now compare that to a $400,000 property in Wyoming. Rent there might be $1,800 a month ($21,600 yearly), a 5.4% yield, and a 4% appreciation rate because the state is booming. Even though the yield is similar, the higher appreciation in Wyoming could tip the scales.

Using the rule of three, you instantly see which deal offers more upside without digging through dozens of pages. It’s the same trick used in other posts on our site – the 5% rule for buying vs. renting, the 8% cash‑on‑cash return benchmark, or the 2% cash‑back offer on commercial deals. All of them boil down to three easy numbers.

When you’re scrolling through our tag page, you’ll notice many articles mention a "rule" – whether it’s the 5% rule, the 6‑months‑and‑a‑day rule, or the cash‑on‑cash return rule. The common thread is simplicity: focus on the three figures that matter, then act.

Give it a try on your next house hunt. Write down price, expected rent, and projected growth. If the three numbers line up in a way that meets your goal – whether that’s cash flow, equity building, or a low‑maintenance rental – you’ve got a deal worth pursuing. If they don’t, keep looking.

Bottom line: the rule of three cuts the overwhelm out of real estate. It turns a mountain of data into three clear signals, so you can move fast and confident.